Boston, MA 05/29/2014 (wallstreetpr) – Staples, Inc. (NASDAQ:SPLS) reported sales of $5.7 million and net income of $96 million in its first quarter of 2014 ended May 3, 2014.
Stores Closure Squeeze Earnings
During the quarter, net sales were down by 3% compared to prior year period due to the negative impact of foreign exchange and closures of stores in North America. North American store sales were down by 5% due to 4% year over year decline in comparable stores sales and 6% down in Staples.com sales.
In addition, the weaknesses over European delivery business further reduced the sales of international operations by 4%. However, North American commercial services remained flat and showed a positive sign of growth.
The declining sales compressed the adjusted (non-GAAP) gross margin for the period to 25.1%. It also declined the adjusted operating margin by 167 basis points to 3.2% during the first quarter of 2014 due to decrease in operating income of $183 million (1Q2013: $285 million).
Staples, Inc. (NASDAQ:SPLS) incurred $46 million of restructuring charges related to the closure of stores in North America as the Company closed 16 stores during 1Q2014. The restructuring charges together with lower sales and associated operating costs reduced the Company’s adjusted diluted EPS by 31% to $0.18 compared to prior year period.
Despite low earnings, Staples generated $360 million from its operating activities and capital expenditures of $48 million that reflects a free cash flow of $312 million during the first quarter.
Outlook
Staples, Inc. (NASDAQ:SPLS) expects to close ~80 stores in the second quarter of 2014 and anticipates restructuring related charges of $105-$155 million in 2Q2014 and $240-$360 million in FY2014. So, the Company continues to report lower sales and anticipates non-GAAP earnings of $0.09-$0.14 in 2Q2014.
Staples, Inc. (NASDAQ:SPLS) expect to generate free cash flow of $600 million with capital expenditures of $60-$100 million in FY2014.
